Langton Capital – 2017-04-13 – Dorcaster, Easter, IPOs, coffee sales, Brexit & other:
Dorcaster, Easter, IPOs, coffee sales, Brexit & other:
A DAY IN THE LIFE:
Well it feels like a Friday and there’s a reason for that, we get to have a lie in tomorrow.
And the day after and the day after etc. and, as it’s remaining dry, we’ll probably be cutting the (heartlessly growing & vindictive) grass and sparking up the BBQ. So here’s the last chance to say Happy Easter to all our readers. As mentioned yesterday, don’t be too embarrassed to send us chocolate, beer or money. Or expensive man-trinkets. No chocolate-beer. And definitely no cards or flowers. To date and as expected, the postman has been untroubled. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• New research conducted by Mintel has found that 65% of UK consumers have visited a coffee shop in the last three months. These findings represent the largest growth in the UK coffee industry since 2008, with the market now valued at £3.4bn. Like-for-like coffee sales rose 10.4% in 2016, with sales expected to climb another 29% in the next five years.
• Time Out Group plc has announced that Christine Petersen will become CEO of its business division, Time Out Digital. Christine has experience working in media, e-commerce and travel, leading brands such as TripAdvisor. Time Out Digital operates as the group’s multi-platform media, entertainment and e-commerce business division and delivered digital revenue growth of 39% in 2016.
• The number of people visiting a pub in March increased 12.5% in March 2017, according to Barclaycard data. Barclaycard managing director, Paul Lockstone, said ‘Robust growth in spending on ‘nice to haves’ suggests consumers are still willing to treat themselves, especially on experiences with friends and family.’
• The Government is contemplating the implementation of a deposit return scheme for bottles and cans. The deposit return scheme would follow the success of the 5p plastic bag charge, which has reportedly reduced the number of bags found on beaches by 40%.
• Greene King has announced the appointment of ex-Morrisons wine procurement manager, Andrew Ingham, as head pub retailer and brewer’s wine buying manager.
• AB InBev has completed the sale of its shareholding in Distell Group as part of its business combination with SABMiller.
• Kate Nicholls, CEO of the ALMR, said ‘The latest figures from CGA Peach show a relatively robust sector weathering economic uncertainty and continuing to attract customers with dynamic and exciting offers.’ and that ‘With costs rising, and with Brexit causing uncertainty for employers, the Government must act decisively [through industrial strategy] to support pubs, restaurants and bars that contribute so much economically and socially.’
• Ei Group’s managed arm, Bermondsey Pub Company, has reached more than 40 sites after a series of recent openings. Bermondsey Pub Company is led by Richard Woodward and has a target of 50 sites by September 2017.
• Bubble & Squeak seller Bubble & has extended its offer on Crowdcube. The group says ‘due to the number of ongoing discussions with investors, we have been granted a 2 week extension to our campaign. Our campaign will now close on the 30th April at midnight.’ The company has reduced its valuation to £500k. As of yesterday, the group had raised £27k of its intended £100k fund raise.
• Times reports more than a quarter of British employers have seen job applications from EU workers fall since the 23 June referendum. The Bank of England recently suggested that EU nationals are leaving the UK as a result of the question mark currently hanging over their residence status come 2019. See comments under Finance & Markets below.
• Marston’s Premium Bars and Restaurants has agreed to purchase three Pointing Dog pubs for an undisclosed sum, with the transfer set to take place at the beginning of May. The pubs are in Sheffield, Bakewell, and Cheadle and will be operated by the Revere Pub Company, which intends to continue to grow via selective new site acquisitions. Colin Sadler, MD of Revere said of the Pointing Dog sites: ‘We are particularly impressed with the passion and commitment of the Pointing Dog team, and are delighted that the management and staff of the bars and restaurants will be transferring with the business.’
• Pubs across the UK are expected to benefit from long lunches and trips this Easter weekend and the hospitality sector as a whole is set to rake in some £280m in debit/credit card spend. The latest data from Worldpay indicates that the Easter bank holiday is one of the most ‘important periods of the year’, with sector takings poised to be up on the average weekend by as much as 15%. The data is based on calculated sales processed on Easter weekend 2016, using total card transactions processed by Worldpay in pubs and restaurants.
• Refresco Group has rejected a takeover bid valuing the company at €1.4bn by the French private equity firm PAI Partners. Refresco, which bottles brands such as Del Monte juice drinks and Innocent smoothies, currently has a market cap of €1.13bn after its largest ever share price gain of 7.39% earlier in the week.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Michael Gove has been criticised for describing holiday companies that put their prices up in peak periods as sharks. Mr Gove, who entered parliament in his 30s after a few years as a journalist, has been told that supply and demand 1) exist and 2) have an impact on pricing. AITO chairman Derek Moore commented ‘Gove’s suggestion to cap prices on holidays are a non-starter. They are unrealistic. It’s a comment made by someone who probably needs to learn a bit more about the travel industry before taking a swipe. Perhaps he should spend a bit of time with tour operators. It’s easy to put the word ‘rip off’ in front of something and make it a story, but consumers need to understand pricing is not that simple. It’s very much misunderstood.’
• A study shows that British families are willing to spend 13% more on their holiday in 2017 compared to 2016, with a family of 4 prepared to spend on avg £3,133. The Civil Aviation Authority’s Atol scheme also showed that the family of four should set aside £536.80 for unforeseen holiday costs in 2017.
• This Easter weekend will see 6.6m people planning overnight breaks in the UK, an increase of 600,000 over last year with an estimated boost to the economy of £1.7bn.
• Monarch Airlines forecasts passenger numbers to increase by 20% over the Easter weekend yoy, with mainland Spain and the Canary Islands being the most popular destinations. Chief commercial officer, Ian Chambers, said ‘with Monarch’s no overbooking policy and genuine, friendly service, customers can be sure of a nice flight to get them on their way.’
• Lyft receives investment from KKR and Rakuten as part of a $600m funding round at a valuation of $7.5bn.
• Ongoing calls for a United Airlines boycott after the enforced removal of a passenger sent the company’s shares down by 4%, before recovering to close at just 1% down. United CEO Oscar Munoz has issued a second statement apologising over the incident, but said he will not be resigning.
• Leisure cash shell Dorcaster has this morning announced that it is to acquire Experiential Ventures Ltd & will subsequently change its name to Escape Hunt plc
• Dorcaster to place 10,370,370 Shares at 135p. Group says ‘it has conditionally agreed to purchase the entire issued share capital of Experiential Ventures Ltd for a consideration of £12 million on a cash free and debt free basis, with a normalised level of working capital. Experiential Ventures Ltd is the holding company of the Escape Hunt Group.’
• UK record company revenues reached a five-year high in 2016, according to data from the BPI. Total sales from streaming, downloads, physical sales and licensing for use in films, TV and computer games increased 5.1% to £926m. Chief executive of BPI, Geoff Taylor stated ‘Britain’s world-leading music sector has the potential for sustained growth in the years ahead, but this exciting future can only be realised if government makes creative businesses a priority post-Brexit.’
• Instagram’s Direct Messaging service is now used by 375m people, according to the company. Alongside the traditional messaging service, the social media platform has introduced a short-lived and self-deleting messaging service to compete with Snapchat.
• Another leisure company on the market. Ten Entertainment Group plc, UK’s 2nd largest bowling alley operator, prices IPO at 165p. Co to raise £26.8m
• Ten Entertainment to be valued at £107m. Dealings to begin today. Current owner Harwood will own around 69.4% of the group’s shares. Group says ‘the Selling Shareholders (including the Directors) have committed to lock-up arrangements for 12 months with a further 6 month orderly market period.’ Chairman Nick Basing comments ‘today represents a springboard for the Company to take advantage of the opportunities ahead. I would like to welcome our new shareholders who recognise our leading and differentiated proposition and the strength of our business model.’ Group CEO Alan Hand adds ‘our family focused offering provides great value entertainment in great locations, delivered with exceptional customer service. TEG’s experienced management and highly cash generative operating model together with a clearly defined growth strategy will enable us to deliver sustainable and growing returns
FINANCE & MARKETS:
• UK unemployment remained at 4.7% in February. Real wage growth at three year lows. Could turn negative by April
• Average weekly earnings rose by 2.3% in the year to February, unchanged from the month before. The ONS comments ‘average weekly earnings for employees increased by 2.3% including bonuses and by 2.2% excluding bonuses, compared with a year earlier.’ It adds ‘however, adjusted for inflation, average weekly earnings grew by 0.2% including bonuses and by 0.1% excluding bonuses, over the year, the slowest rate of growth since 2014.’
o ONS reports one in 10 manufacturing jobs are filled by EU migrants. Times reports >25% of UK firms have seen job applications from EU workers fall and Bank of England reports migrants are going home.
o One in seven workers in hospitality come from the EU. ONS said yesterday ‘today’s analysis shows the significant impact international migration has on the UK labour market. It is particularly important to the wholesale and retail, hospitality, and public administration and health sectors, which employ around 1.5 million non-UK nationals.’ It continues ‘migrants from Eastern Europe, Bulgaria and Romania are likely to work more hours and earn lower wages than other workers, partly reflecting their numbers in lower-skilled jobs.’
o Tech entrepreneur (and Finn) Taavet Hinrikus tells the BBC that a talent shortage is emerging in London. Says if he were starting a business again, he wouldn’t do it in London. He said ‘there is a lot uncertainty and uncertainty doesn’t help business. So for starting up a new fintech company, [the UK] is not the best place any more.’
• Brent down at $55.86
• Sterling up vs $ at 1.2563
• Pound little changed vs Euro at 1.177
• UK 10yr gilt yield down again on stagnation fears at 1.05% (was 1.06%)
• World markets: UK mixed yesterday with Europe higher. US down & Asia mostly lower in Thursday trade.
YESTERDAY’S LATER TWEETS:
• Later tweets: UK unemployment holds at 4.7% and average earnings stuck at 2.3%. Earnings now bang in line with inflation.
• UK CPI yesterday (+2.3% in year to March) influenced by Easter. April figure could/should be markedly higher.
• UK input price inflation 17.9%. Either this will get passed, corporate margins will fall, or it will get reversed. Or a bit of all three
• Bank of England inflation target currently being overshot. Will be worse in April. Bank comments on interest rates tomorrow…
• Is athleisure helping Sports Direct? Running gear or slouching gear? The latter is a much larger market
• Comptoir. Offer stumbles in early months of 2017. Costs may come under scrutiny. Shares lost 45% in 6mths.
• Comptoir. Jan & Feb were ‘below expectations’ but March better. Group expects a good April & summer. Visibility surely limited?
• Langton e/m revealed to be brilliant. Also, it’s free. Sign up on website, no strings. http://www.langtoncapital.co.uk/?p=1638
RETAIL NEWS WITH NICK BUBB:
• Overall View: Well, the City was in a picky mood yesterday, finding fault with Tesco, WH Smith and Dunelm, as evidenced by the weak share price reactions, notwithstanding reasonably confident outlook statements…
• NB This is the last edition of “The Daily Retailer” produced this year from the ski slopes of the Rocky Mountains of Colorado (where we are 7 hours behind BST), as tomorrow is Good Friday and we fly home on Saturday night. We’ll be back on Tuesday morning.
• Sector trends/share prices: The All-Share index was down a tad yesterday, but the Food Retail sector was down by as much as 4.0%, after the badly received Tesco finals (TSCO -5.7%, SBRY -2.7%, MRW -1.7%, BOK -4.1%, WINE -3.6%, GRG +1.5%, CVR +4.3%). The General Retail sector was up by 0.3% overall (JD +2.3%, TED +1.8%, LOOK +2.4%, CARD +1.4%, ASC +1.0%, BWNG +1.2%, MTC +1.6%, DFS +3.7%, GMD +4.0%, MOTR +6.0%, NXT +0.7%, SPD -0.8%, VTU -1.6%, DNLM -3.2%, SMWH -3.1%).
• Tesco: The final results from Tesco yesterday beat expectations, with Group operating profit before exceptional s up 30% to £1,280m, but the shares fell sharply, as the City picked holes in the ballooning pension deficit, some mixed performances Overseas and cautious comments about the UK trading outlook. On the face of it, however, CEO Dave Lewis seemed as bullish as he could be: “We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October. We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambition”.
• WH Smith: The interims from WH Smith (for the 6 months to end Feb) also looked fine, with EPS up 7% and the interim dividend up 9%. And CEO Steve Clarke also seemed confident about the future: “2017 is a significant year for us as we celebrate 225 years since the business was founded. And, while there is some uncertainty in the broader economic environment, we will continue to focus on profitable growth, cash generation and investing in the business which positions us well in the current year and into the future”. But, although there was news of more key contracts win for the burgeoning International Travel operations (including at Singapore airport), the shares also fell back, perhaps on disappointment that there was no further full-year profit upgrade.
• Dunelm: To complete a hat-trick, the Dunelm share price also fell back after its Q3 update yesterday, although in this case the source of disappointment was more obvious, after the company said upfront that “The homewares market remains in decline”. But CEO John Browett said “We have continued to outperform the homewares market and so enhanced our position as market leader. As a result, our expectations for the full year remain unchanged. We remain excited by the acquisition of Worldstores. The business has stabilised and our integration plans are developing well”. Total LFL sales (combining LFL stores and Home Delivery) declined by 2.2% in the 13 weeks to April 1st, but Dunelm said that “With Easter being later this year, we expect approximately 1.5% of LFL sales to move from the third to the fourth quarter”.
• BDO High Street Sales Tracker: We flagged yesterday that Fashion trading at John Lewis last week was boosted by the fine spring weather, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e April 9th saw Fashion Store LFL sales drop by 1.0% against last year. Including Homewares and Lifestyle chains, total Store LFL sales were marginally up, by 0.6%, albeit against a soft comp, but overall Online sales were up by as much as 21% (on top of 21% growth a year ago).
• Peach Tracker Watch: We are indebted to our friends at the Leisure sector experts, Langton Capital, for flagging up yesterday’s monthly figures from the curiously named Coffer Peach Tracker of pub and restaurant sales. And the late Easter again impacted trade, with overall LFL sales for the March period down by 0.5% on last year (although total sales were up by 2.1%, including new openings). London again did best, with LFL sales inside the M25 actually up by 2.9%, compared to a 1.7% dip for the rest of the country.
• Today’s Press and News: The main focus in today’s papers is on the Tesco finals and although the front page FT article is headlined “Tesco sees first sales rise since 2010” and there is a main feature headlined “Investors alive to the challenges facing Tesco”, the Lex column piece in the FT notes that “Nearly three years on from the accounting scandal at Tesco, the higgledy-piggledy trajectory of its share price suggests the market is still not convinced by its strategy” and concludes that “Achieving the targeted improvement in the operating margin to 3.5% and absorbing Booker leaves Mr Lewis with a lot in his trolley”. The FT also has a lot of coverage of the WH Smith interims, with a feature headlined “Spoof humour stems decline at WH Smith” and a Lombard column piece headlined “WH Smith reads like a bestseller on managing High Street decline”. We can’t see anything about the
• Trade Press: “Retail Week” was busy moving offices this week, so we don’t think the magazine was produced, but “Drapers” magazine has been published and its front cover is a bold graphic with the headline “How Connected are You?”, flagging up a Multichannel Report about how “retailers and brands must deploy all the weapons in their armoury to keep the customer engaged”. In her column, the Editor looks at the contrasting news from Jaeger and JD Sports and thunders that “Jaeger and JD prove that strategy matters”. In terms of News stories, Drapers flag that “Fashion multiples across the UK are ready for a bumper Easter weekend” as shoppers are expected to take to the High Street in the warm spring weather and also highlight that the Online fashion etailer Missguided has reportedly appointed Rothschilds to advise it on a review of its options, which include a possible sale or
• News Flow Next Week: Things are quiet next week after Easter, but on Wednesday we get the Burberry Q4 and the ABF (Primark) finals, Thursday brings the much-awaited Debenhams interims and strategic update and the ONS Retail Sales figures for March are on Friday.